Green Building Series: Legal Issues of Solar Energy Series

Once the sole domain of the ecologically minded, the green movement has gone mainstream. Part of the green movement has been the increase in solar power use in homes and businesses. People decide to buy solar electric systems, which are also called photovoltaic (“PV”) systems, for a variety of reasons. Some want to preserve fossil fuels and reduce air pollution. Some want to invest in an energy producing improvement to their property. Still others like the independence of a solar system, making them less vulnerable to increases in energy prices.

The important point for both residential and commercial property owners is that solar systems for homes and businesses are becoming more affordable. On October 3, 2008, President Bush signed into law the “Emergency Economic Stabilization Act of 2008” which among other things, extended tax credits for solar energy systems. The tax credit applies to both residential and commercial solar installations for 30% of the cost of a system “placed in service” from January 1, 2006 through December 31, 2016. This energy investment credit also provides businesses with a 5-year accelerated depreciation for the cost of equipment used to generate solar electricity. With the 8 year extension of the Investment Tax Credit, the solar industry is projected to gain 440,000 permanent jobs and $325 billion in investment by 2016. Major retailers across the country have begun to invest in commercial solar systems. Target, Staples, Whole Foods, Safeway, Costco, Wal-Mart, and Best Buy among others have installed or announced plans to install systems.

A multitude of states including, Kentucky, Ohio, Indiana, Tennessee, and West Virginia offer additional tax incentives for solar systems which include, sales tax exemptions on the purchase of solar systems, property tax exemptions, state personal income tax credits, solar rebates, or net metering programs, which enable system owners to sell excess power generated by their system to the utility. It also enables the system owner to draw power from the utility at times when the solar panels are not generating enough electricity. The system owner is billed for the difference between the electricity used from the power grid and the electricity generated by the solar system. This allows owners to receive value for the power generated by their solar system. Whether that value is wholesale or retail depends on the state’s net metering statute.

According to the construction industry, systems typically last 30 years, and by taking advantage of incentives, rebates, net metering, and assuming an increase in utility costs, a system may begin paying for itself in about 10 years. However, even though federal and state solar rebate programs and net metering make solar systems more affordable they will not be able to match the price for utility electricity if the utilities maintain their current rates.

The increased interest in solar energy and solar systems has created certain legal issues, including: 1) solar easements, 2) Homeowner’s Associations requirements, 3) zoning and building codes. Future Green Series Building posts will focus on these issues.

Julio V. Driggs is an Associate in the Commercial Transaction and Real Estate Group of Frost Brown Todd, which has a Resource Conservation Committee that is helping the firm go green. Mr. Driggs is licensed to practice in Kentucky.

Posted by: Julio V. Driggs

Categories: Current Developments / Legislation